US PET demand may be showing first signs of weakness

HOUSTON (ICIS)–Demand for US polyethylene terephthalate (PET) remains strong, supported by sustained buying activity from the end-user segment – mainly at supermarkets via food packaging, according to many market participants.

Unseasonably increased demand of PET packaged foods and cleaning products in mid-to-late Q1 was the result of bulk buying amid the spread of the coronavirus in the US.

Several industry sources predicted that demand would collapse in early-to-mid Q2, particularly as unemployment rates started to rise. Along with anticipated declining demand in Q2, resin prices were expected to erode by several cents in May, given plummeting crude oil and feedstock paraxylene prices.

Demand seems to be affected in pockets depending on the impact of the pandemic.

May prices for domestic PET resin appear to defy logic as pellets are holding mostly flat, with some contracts through end June settled at April levels.

Imported resin prices have seen some erosion.

“Spot price is in the mid-to-low 40s cents/lb at the moment,” a seller indicated, while another local source said that “prices did drop a little bit […and…] right now [they are] around the mid-40s cents/lb DEL”.

Some producers cited strong Q1 demand and similar robust buying interest in Q2. Convertors are reporting 10-15% demand increase. The reason seems to be that buying patterns have shifted according to the new needs brought about by the coronavirus crisis.

All sources appear to coincide in that “the only segment that suffered [is] CSD [carbonated soda drinks] and the carpet segments”.

While carbonated drinks are no longer among the top products purchased during warmer weather conditions, consumers increased purchases of packaged meals, cooking oil, hand sanitizers and other disinfectant products and water.

Consumption for crystallizable PET (CPET) used for meal trays has been strong, reflecting an increase of over 30%, according to producers. The increase is due to the stay-at-home measures stemming from the pandemic, particularly in April.

“It looks like demand is still strong in the beverage sector,” said a supplier adding that, “The biggest winner [seems to be] the C-PET trays [as their] demand increased 30-50%.”

Additionally, PET is being used for the production of face shields, the use of which is becoming popular not only at hospitals but also at nursing homes, among care givers and the rest of the population at large depending on the impact of the virus.

Other PET suppliers are already experiencing a decrease in demand as they explained that “the market is slow right now, at least most of our customers are cutting down production due to the virus or economic [reasons]”.

Many also fear that “without the vaccine or effective medicine, there is still a high chance of second or third wave, just as in China; which, in order words, [could mean] another lockdown”.

There is plenty of uncertainty currently in the market, with the main demand driver being the severity of the economic situation created by the virus. Demand, more than feedstock costs, is likely to determine resin pricing.

PET resins can be broadly classified into bottle, fibre or film grade, named according to the downstream applications. Bottle grade resin is the most commonly traded form of PET resin and it is used in bottle and container packaging through blow molding and thermoforming. Fibre grade resin goes into making polyester fibre, while film grade resin is used in electrical and flexible packaging applications.

PET can be compounded with glass fibre for the production of engineering plastics.

DAK Americas, Indorama, Nan Ya Plastics Corporation and Far Eastern New Century (FENC) are PET producers in the US.

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Focus article by Luly Stephens